Turning Pro – Review

I have read two of Stephen Pressfield’s books now and I have really enjoyed both of them. “Turning Pro” is a fantastic book, full of short and to the point chapters. Not even chapters, really. More like ideas. I found it even more compelling that “Do the Work”.

The central idea is that there are two types of people: amateurs and pros. The difference between the two isn’t what you might think it is.

Amateurs don’t pursue the things they want. They say they will, as soon as they can get free from their distractions. They then proceed to create as many distractions as possible. They live in a tortured mindset of always wanting something and not being able to get themselves to get there. Bhuddists might say that they are unenlightened, or spend most of their time not on “the Path”. We all know these people. In fact, we all were/are one. In short, they are phoning it in.

Professionals know what they want, know what it takes to get what they want, and suit up, show up and do the work. This does not mean that they are always happy, or pursuing their passion, or can make things happen that are impossible, or “think and grow rich.

I really struggle to explain the difference between the amateur and the professional. Pressfield wrote in such an emotionally vivid way, that it seems as if he never really explains the difference. He just tells stories, mostly about himself, until you grok the idea. I can’t figure out how to explain that. It really is an experience you have to just have.

Professionals don’t have all the answers and are not necessarily living a dream. But they find a sort of “zen” center in knowing they are pursuing something they enjoy and are good at, and they take comfort in knowing they are making progress towards something.

It is tough to describe in just a few short sentences, but the best example from the book is the Marine and his two salaries. His financial salary might be low, but he also has a psychological salary. The comfort and feeling of knowing that he belongs to something, that his calling has honor, and that no one can take that away.

If you feel like you aren’t living up to your potential, or that you could do even more, I encourage you to check out this book. It will definitely be worth your time.

 

 

The Way of the Shepherd – Review

I read “The Way of the Shepherdimages” at the urging of the owner of my company and discovered leading and managing are two very different things. If you are trained as a manager, and that is your comfort zone, then leading is going to be a significant challenge. This book, written as a fun parable, really helped me change the lens through which I look at the role of a leader versus that of a manager. It can be a difficult shift to make. What I have discovered is that leadership is equally easier and harder than managing.

Managing is about command and control. It’s about organizing a slew of projects and priorities and the vast swath of actions and tasks that need to be done to accomplish those projects. It’s about making sure that when A is relying on B and B is relying on C and C falls down, there is a way to keep the machine going. It can be an arduous task.

When trying to lead, it is easy to just expand the scope of the management operations. Management involves tracking tasks and projects. But trying to control the activities of everyone in a decent sized organization is impossible. Trying to manage the activities of professional staff is even more impossible. People are, well, people. They are not machines. They are unpredictable; sometimes they accomplish more than you expect and other times they fall far short of expectations. If you have a project sheet and task list for that person, you will pull your hair out trying to keep up. Their progress is their own, all you can do is try to guide it and protect them.

What I have learned is that leadership is just an entirely different way of doing things. Almost none of the tools that you use as a manager are useful in the leadership role. This book did a great job of laying out some simple ideas to get you started on the path to leadership. It certainly doesn’t have all the answers. It won’t cover every situation that might arise. But for someone like me who has seen the world through the manager lens for so long, it was the perfect short, sweet, and simple shake up that I needed to look at things totally differently.

The book really will take two hours to read. If you have people who report to you at ALL, you need to take a look at this book.

Thinking…

I have a couple random thoughts that I have been thinking about. None of them are large enough to be an entire post, so I thought I would do a “what I learned” post.

Thinking is hard work. You don’t realize it, but it is. And when the questions get bigger, it becomes even more work. But it is a very “hard to manage” work. If you had lots of tasks to accomplish, you could make a list, buckle down, and crank things out. But really big decisions permeate everything you do. Your brain doesn’t stop processing them because you’ve left the office. It doesn’t start processing because you have set aside a few hours to brainstorm. The thinking happens when it can, and there really isn’t much you can do about it.

Speaking of thinking, I heard an interesting idea the other day. My buddy, Matt—who has forgotten more about the markets and trading then I will ever likely know—and I were talking about the Fed, Treasury debt, and quantitative easing. We arrived at several conclusions. First, the financial markets are rigged against the little guys. It is sad, but true. It becomes critically important, if you are not a wealthy investor or institution, to look at how you hedge your risks.

The second thing we talked about what his idea to solve the debt crisis. It goes something like this:

The Fed is printing money to buy US Treasury debt. The Fed currently owns a significant chunk of the US government debt and is buying more each month. What would happen if the Treasury defaulted on just the debt that the Fed owned? You would instantly solve both the problems that worry most people: that the Fed’s balance sheet is getting too big and that the US government has too much debt. But with the stroke of a pen you could wipe out both of those things. Or if not wipe out, put a large dent into.

It makes you think about the money supply and how esoteric the whole thing is. Look for more on this idea later.

 

 

 

I Learned QuickBooks might not suck!

If you know me, you know that I dislike QuickBooks. For a variety of reasons.

What I learned this week is that I might be wrong. I’ve always known that I can be wrong, I’m wrong all the time. But I might be wrong about QuickBooks.

The new version of their online accounting software has been completely redesigned and the “test drive” I took was very cool.

It seems to me that QuickBooks just shifted their business to being an “eco-system” rather than a piece of software you use. This is a brilliant move on their part and all those other online software programs that I used to recommend should be scared, very scared. A couple high points, just from the few minutes I spent playing around with it:

-Mobile devices usage is awesome. It lets you fill spare moments with doing a little accounting work, instead of being idle. All those little moments add up to not much focused accounting work needing to be done, is my guess. A brilliant strategy and very reflective of the way people use their devices today.

 

-Linking up bank and credit card accounts in the background lets the computer gather the data for you to process. QuickBooks has had something like this for a while already, but it seems much more streamlined and easier to alter, making it is easier to start and stop that work, instead of having to find hours at a time to get accounting done.

 

-The “overdue” and “needs attention” warnings are awesome. By keeping small business owners (who by and large are accounting novices) focused on a couple issues, they can make meaningful impact on their business without knowing exactly how or why.

 

-Changing from a license billing model to a monthly fee model. This is the best part of the whole thing. Having the data in the cloud, with up to three simultaneous users (in the mid-tier version) eliminates the largest problem we have had with QuickBooks. They have really used all the best of currently available technology to really give the software a 21st century face lift.

 

All in all, I give this a solid thumbs up. I have talked a lot of Sh*t on Quickbooks and Intuit. This is me saying I was wrong, and BRAVO.

Look for more info on this later, as I start developing some guidebooks on how to run company on this software! I think this will be the backbone of how I tell business owners to run their business.

 

This week I learned about a clever evaluation tool called “DuPont Analysis“. It is a metric that measures Return on Equity by looking at three factors:

400px-DuPontModelEng.svg

 

-Profitability (Measured by profit margin)

-Operations (Measured by asset turnover)

-Leverage (Measured by equity multiplier)

I thought I would share this because it was intriguing  how all the various ideas of business can be rolled in to one metric. Most small businesses won’t find this kind of analysis, in a technical sense, useful. Even if you have QuickBooks and have good records, sitting down to calculate this has little value.

However, it is worth noting, that no matter how small your business the idea still holds valid. Your business generates value in several ways:

Profit Margin: Is your core business model sound? Does it make sense? Am I generating sufficient profit on my revenue?

Operations: Am I using my assets (people, machines, inventory, etc) efficiently? A business with a sound model can still be run poorly from an operations stand point.

Leverage: Am I using my money wisely? In large companies this means “Do I have the proper capital structure for our business?”. But in small businesses it represents a much easier idea: “Am I using my money wisely?” Do I spend too much? Am I reinvesting in my business? Am I reinvesting in smart ways?

 

Anyways, just another example of my central thesis that: just because your business is small, doesn’t mean it can’t and shouldn’t be looked at in complete and sophisticated ways. And that can be surprisingly simple to do!

 

 

http://cpaandrew.com/2013/10/23/745/

Current Account Balances are Simple!

I learned something important this week. Actually, I learned two things.

The first is that all those terms you hear on the news (and ignore) aren’t as complicated as you think. I don’t know where we got the idea that only experts and academics who do nothing but study can understand global trends in economics. Most people I know could follow a simple story about the first decade of the 20th century. I just wonder why no one explains it simply.

The second thing I learned relates to trade balances, current accounts, imports & exports and deflation. All those words that you usually ignore.

For most of the first decade of the 21st century, we have had low unemployment. Usually when unemployment is low for extended periods, inflation starts to become an issue. As employers have to pay more for labor (because there is a shortage) employees have higher pay. Employees with higher pay tend to increase their own spending, which bids up prices for goods, causing inflation.

But curiously, the inflation rate didn’t move that much in this time period. Sure, we had inflation, but it wasn’t out of control. Yet unemployment remained low. How did this happen?

The simple answer is the current account balance was negative the entire time. We “exported” our inflation. As developing countries, noticeably China and India, became more plugged into the global economy, we purchased more and more items more and more cheaply. This “deflation” offset the inflation that low unemployment was causing. The end result is that we landed somewhere in the middle of the two.

Trade isn’t a zero sum game! Those countries needed growth, we needed deflation, so they traded their deflation for our inflation and everyone ended up happy. Well, maybe not happy, but you get the idea.

Why should you care? Now that you understand the mechanisms, you can make sense of what people are telling you. You can now tell people who complain, “China is going to buy America because we owe them so much money!” that if they really understood trade balances, they’d know those countires needed our growth as much as we needed their savings.

You can also know that, if this trading starts to taper off (China’s growth starts to decrease, for example) there is a good chance our deflation will slow down. If deflation slows down, the opposite happens and we get inflation. With inflation, we get people back to work!

See? it isn’t that hard.

Selling a Business

This week I learned a lot of business are being sold right now. At least, there are in my world. This is not a comment on the business cycle as a whole, just an observation on what I see. It does make sense though, based on the demographics of the world. More and more Baby Boomers are looking to retire and trying to extract some value from their business is an important part of that puzzle.images (1)The real thing that I have learned, that is interesting, is that there is a LOT of variation in the market for buying and selling very small businesses. If you want to sell a company worth $50MM or more, there are lots of brokers, investment advisors, and consultants that can help. The market is pretty clean and professional. If you have a business doing $500k to a couple million a year, then it is quite likely that you are being under-served. Or worse yet, leaving money on the table.

The range of deals and brokers is vast. I have seen lots of brokers that are quite simply idiots (see my tweet about New Web Sights) and I have seen more that are just crooks.  I know, and use, some that are worth their weight in gold. But they are the exception, not the rule. I have had clients get such fantastic deals I almost feel bad for taking advantage of the seller. I have seen clients walk away from deals that were the best they were ever going to get, and accept deals that were way too low.

Here are a couple things I have learned from helping clients buy and sell businesses ( buying a few myself):1. Signing an exclusive contract with a big commission is not a mandatory part of the process.
2. Having someone who can take the emotion out of it for you is usually well worth the cost.
3. But don’t be afraid to shop that cost around!
4. Brokers will sell themselves by how much higher value they can get for you because of how they “market” your business. The truth is, their greatest asset is being able to connect you to possible buyers. You either have a great business or you don’t.
5. Get a realistic expectation of what your business is worth. Be prepared to support that value.
6. If you can’t produce numbers and support for how valuable your business is, then expect no value from the sale.
7. You might be pleasantly surprised by how much your business is worth. You might also be shocked at how much less it is worth than you think.
Even if you don’t think you want to sell your business any time soon, knowing what it is worth is critical. If you are planning to sell at any point, knowing this is even more important. So start gaining an understanding of how the process works ahead of time, and don’t get taken for a ride!

Economic Theories are Fun!

What I learned this week:

I am reading Profiting through Monetary Policy and there was a great description of the difference between the Credit Supply theory and the Money Supply theory of economics. In most cases, the Austrian Business Cycle theory (another name for the Credit Supply Theory) has been shown to be flawed in many ways. Regardless, it still is a useful lens to use to look at the more mainstream idea of Money Supply. The short version is this: central banks and governments try to control price levels using the money supply as their tool. They use things like interest rates, asset purchases and sales, and fiscal policy to increase and decrease the supply of money in the economy, thereby attempting to equalize the business cycle.
images
An alternatively well-known version of this involves the Phillips curve, which no one knows by name even though understand the relationship. If unemployment is high, then increasing the overall pace of the economy (GDP), which is inflationary, will tend to decrease unemployment. In other words: you can trade unemployment for inflation. Increasing one (inflation) will decrease the other (unemployment) and vice versa.

The Credit Supply idea says that this manipulation of the money supply is what causes the business cycle (boom and bust) in the first place. The easy supply of credit inflates asset prices as money moves into them, increasing the money supply. When the market then has to match productive capacity realities to the inflated asset supplies, money has to come back out (a crash) in asset prices.

The first decade of the 21st century experienced both low unemployment and relatively low inflation. It could be argued that the only reason all that low unemployment and easy credit did not inflate the economy was that during that time China, India, and other developing countries were “exporting” deflation to us. The costs of goods were falling in conjunction what should have been inflation, because so many millions of workers were finally being plugged into the global economy. But it turned out that we in developed countries are not that much more productive than the new labor coming from developing nations. Therefore, as per Credit Supply theory, we eventually had to value assets on their real value and not nominal value. Prices came crashing down again, and all the additional money into the economy didn’t help much.

Is this a 100% true and accurate representation of what happened? No. Is there a definitive answer to whether the business cycle moves according to Credit Supply or Money Supply? No. But did I learn something new about what may and may not drive the changes in prices we see? YES.

And learning is good!

The Information Diet – A Review

imagesI was very excited to read Clay Johnson’s The Information Diet. I was intrigued by the idea of an “information diet,” but I was even more intrigued by the idea that it was possible to filter and control the amount of information I consume.

I was somewhat let down, however, after getting into the book. I was expecting a more academic take on it. While Mr. Johnson does cite some academic studies, in addition to anecdotal evidence, about how over saturated we are today, I think this was a bit overkill. Anyone reading the book is likely already convinced of their over saturation. But I understand that a valid argument has to start with a valid base, so it was interesting to hear what some of the studies have said.

The best parts of the book laid out the negative effect that “epistemic closure” has. This is the idea that groups of people will create closed systems of deduction that does not allow outside ideas to affect the outcome of deduction. It was extremely interesting to think about the sociological effects of the information coming at us and how our filtering of it has changed our perceptions. The best example of this is, obviously, US political groups. Seeking reinforcement within itself and making deductions that don’t necessarily take into account all factors is a great example of epistemic closure. Becoming a rabid believer in the ideas produced in that manner is how we get the almost non-functional political system we have now.

The part that let me down was the solutions. I assumed the author applied relatively low rigor to the base topics because he assumed he was “preaching to the choir,” but it was still disappointing. Most of the ideas revolve around tips and tricks that Mr. Johnson has discovered work well for him. While these are helpful, anyone really dealing with an over saturation of information has already learned how to close their email, stop checking Facebook constantly, or use a time tracker to focus on one task at a time.

I guess I was hoping that the Information Diet was a cute name for an idea that some researchers had put together about the psychology or information decision science behind processing and assimilating information more efficiently. It’s probably my fault for building up my expectations and not understanding the book before starting to read it. I can find tips and tricks on blog posts ad nauseam. When I turn to actual books, I am looking for more depth and rigor. The Information Diet did not deliver that. What it did deliver was not bad, just not what I was looking for.

The Information Diet is an interesting read, but it’s certainly not worth adding to my critical reading lists.

Career Capital Project

The book So Good They Can’t Ignore You talks about the idea of purposeful study and learning. This is one of the most powerful things that came out of that book for me.

With that in mind, I created a new project for myself that I call the Career Capital project. After a light bulb went off in my head and some encouragement from my editor, I thought this blog would provide a great way for me to really focus this new project. I realized that, with my reading lists, I have a built-in and constant store of ideas to learn. I officially have more ideas than I can learn in my lifetime.

But how do I become more purposeful about it? How do I make sure I assimilate all the information that I am taking in, especially the more complex and academic ideas? It’s one thing to read a paragraph slowly to myself in the quiet of my house and think, “Yeah, okay, I get that,” and another for that new idea to impact my decision making when shooting from the hip in a pitch meeting with a potential new client.

To prove you know something, you have to teach it back. They say that any idea you can communicate to a lay person is an idea you have truly mastered. So, I need to practice relaying ideas to other people. “However can I do THAT?” I wonder. If only I had a platform to publish …

Right. You see where this is going.

My idea is to have a “what I learned this week” series. I’ll write down one thing that I found interesting from one of my books, mostly to explain it to myself again. After making sure I understand the idea, I’ll let you know why that idea might be interesting or useful for you.

My reading lists were already built for being purposeful for my own study. The Business Guru reading list was designed specifically to help business owners sort through and distill the ideas that are out there in the world. Economics has always been a passion of mine and underpins everything in the freaking world, so it is always applicable.

What I DID change, however, was my focus. Some of the lists were turned off: History, Physics, Philosophy, High Finance, and General. These are all great lists and things I find interesting but will not help me get better at what I do. At least not right now.

I added a new one: Career Capital. These are books that are all very technical and very focused on a specific task. I want to get more involved with clients who have larger businesses, in operational and strategy ideas, and in valuations and exit planning. I have done this kind of work before, but usually as it presents itself to me. My hope with these guides is to really hone my skills and knowledge to give me the confidence to aggressively pursue that kind of work.

The books are all part of The Economist’s “Guides” series. They are each focused on specific topics. The one I am currently reading is called “The Guide to Economic Indicators.” I am learning all about how GDP, housing starts, unemployment figures, etc. are reported and intended to be used to determine where the economy is going.

So, I am taking the advice that I got from So Good They Can’t Ignore You, and you should, too. Decide what you want to do or be, figure out what skills you need to become that, and start studying. Hopefully, before we know it, we will both be so good they can’t ignore us.